International Journal of Project Management 21 (2003) 97–105 www.elsevier.

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Transforming project risk management into project uncertainty management
Stephen Ward*, Chris Chapman
School of Management, University of Southampton, Highfield, Southampton SO17 1BJ, UK Received 12 June 2001; received in revised form 26 October 2001; accepted 9 November 2001

Abstract This paper argues that all current project risk management processes induce a restricted focus on the management of project uncertainty. In part this is because the term ‘risk’ encourages a threat perspective. In part this is because the term ‘risk’ has become associated with ‘events’ rather than more general sources of significant uncertainty. The paper discusses the reasons for this view, and argues that a focus on ‘uncertainty’ rather than risk could enhance project risk management, providing an important difference in perspective, including, but not limited to, an enhanced focus on opportunity management. The paper outlines how project risk management processes might be modified to facilitate an uncertainty management perspective. # 2002 Elsevier Science Ltd and IPMA. All rights reserved.
Keywords: Risk management; Uncertainty management; Opportunity management

1. Introduction This paper suggests that project risk management (PRM) processes as currently operated have a limited focus which restricts the contribution to improving project management practice and hence project performance. The authors argue that a broader perspective concerned with managing uncertainty is needed. A recent paper by Green [1] makes a related argument, although his characterisation of project risk management as ‘primarily concerned with quantitative techniques’ is inappropriately narrow, and we do not agree with his recommendation. Green’s concern is that established techniques of risk management pay too little attention to uncertainty associated with stakeholder interactions, and the uncertainties that ‘characterise the strategic interface between construction projects and client organisations’. Green argues for the use of Friend and Hickling’s ‘Strategic Choice’ approach [2] to project uncertainty, which seeks to aid decision making processes by conceptualising three types of uncertainty related to the working environment, guiding values, and related decisions. The present authors are sympathetic
* Corresponding author. Tel.: +44-23-8059-2556. E-mail address: scw@soton.ac.uk (S. Ward).

to Green’s concerns. Further, as a generic framework the Strategic Choice approach is certainly capable of useful deployment in a project management context. However, as a generic process Strategic Choice lacks focus on project management issues. Rather than pursue this approach to enhance the management of uncertainty in projects, the present authors argue for transforming existing PRM processes into Project Uncertainty Management. Strategic Choice can be used within this framework as appropriate. This will facilitate and extend the benefits of what is currently PRM. However, it will also help direct attention towards areas of project related uncertainty and associated management issues that are not addressed in current PRM processes. The authors have been moving towards this position over a number of years, in the light of issues that have arisen in consultancy work, conceptual development of existing techniques, and reactions of project managers to presentations on the subject. Nevertheless, the arguments and proposals presented here have not been widely tested. They are offered here to stimulate debate and to encourage empirical testing. The arguments presented here begin by considering how use of the term ‘risk’ induces a restricted focus on the management of project uncertainty. The middle part

0263-7863/02/$22.00 # 2002 Elsevier Science Ltd and IPMA. All rights reserved. PII: S0263-7863(01)00080-1

Risk— an uncertain event or set of circumstances that. We suggest it is important to take uncertainty about anything that matters as the starting point of uncertainty management. The preponderance of such references suggests at least an emphasis.98 S. Such definitions illustrate one problem with the term ‘risk’—its ambiguous use as a synonym of probability or chance in relation to an event or outcome. A focus on one should never be allowed to eliminate concern for the other. loss. It implies exploring and understanding the origins of project uncertainty before seeking to manage it. with no preconceptions . or its cause. and simultaneously offer opportunities for positive improvements in performance. (p 16). or threats to the project. In any given decision situation both threats and opportunities are usually involved. as follows: Risk—an uncertain event or condition that. 3. C. there is still a tendency for practitioners to think of risk in largely down-side. With this association. but they are not independent when it comes to tossing the coin. Table 1 lists references in the PMI guide [4] to risk in down side. (The term) ‘risk’ contaminates all discussions of probability because of the implicit value judgement/s that the term always brings with it. uncertainty management involves rather more than the combination of risk management and opportunity management. This emphasis might reflect a difficulty in throwing off the commonly understood meaning of ‘risk’. For example. entitled ‘‘Against risk’’. In spite of this. These definitions encompass welcome ‘up-side’ as well as unwelcome ‘down-side’ effects. Uncertainty management To emphasise the desirability of a balanced approach to opportunity and threat management. implying that project risks are potential adverse effects on project performance. It is rarely advisable to concentrate on reducing threats without considering associated opportunities. PRM would seem to be about identifying and managing threats to project performance. if not a pre-occupation. Their definitions of risk are very similar. p127]. The final part outlines how PRM processes could be modified to avoid inducing a restricted focus and to address a wider set of sources of uncertainty. but we are very sympathetic to his concerns. guides published by the US Project Management Institute (PMI) and the UK Association for Project Management (APM) have adopted a broad view of risk. and the use of probability impact matrices. It is about identifying and managing all the many sources of uncertainty which give rise to and shape our perceptions of threats and opportunities. defining uncertainty in the simple ‘lack of certainty’ sense. Its multiple and ambiguous usages persistently jeopardize the separation of the tasks of identifying and evaluating relevant evidence on the one hand. opportunities and their implications. As is widely recognised. threat terms (a tendency which the authors are not always able to resist). descriptions of risk responses. opportunities and threats can sometimes be treated separately. but they are seldom independent. Another of our concerns is the focus on ‘events’ or ‘circumstances’ which these definitions suggest. and PRM as primarily threat management. has a positive or negative effect on a project objective [4. In an entertaining and well referenced paper. and eliciting and processing necessary value judgements on the other. just as it contaminates all discussions of value assessment because of the implicit probability judgement/s that it contains [3]. just as two sides of the same coin can be examined at one at a time. the term ‘uncertainty management’ is increasingly used in preference to the more established terms ‘risk management’ and ‘opportunity management’. Problems with the term ‘risk’ In dictionary definition terms ‘risk’ means: ‘‘hazard. The present authors are inclined to disagree with Dowie about abandoning use of the term ‘risk’ completely. with threats rather than opportunities. Recognising this. Ward. and both should be managed. However. will have an effect on the achievement of the project’s objectives [5]. 2. the nature of an outcome. in the sense of ‘potential welcome effects on project performance’. this view of PRM is restrictive because it fails to consider the management of opportunities. Dowie [3] argues persuasively for abandoning use of the term ‘risk’ altogether. One of our concerns relates to the association of the term ‘risk’ with adversity. Courses of action are often available which reduce or neutralise potential threats. Moreover. Chapman / International Journal of Project Management 21 (2003) 97–105 of the paper identifies some basic kinds of uncertainty that need to be addressed in projects. chance of bad consequences. Uncertainty management is not just about managing perceived threats. should it occur. threat terms which include: illustrative examples of risks as threats. and that sources of risk are ‘things that might go wrong’. just as it is inadvisable to pursue opportunities without regard for the associated threats. if it occurs. terminology. ‘‘It is simply not needed’’. Dowie argues that the term ‘risk’ is an obstacle to improved decision and policy making. exposure to chance of injury or loss ’’ (Concise Oxford Dictionary).

It is also about ‘ambiguity’ associated with lack of clarity because of the behaviour of relevant project players.2) Responses categorised as avoidance. ‘inadequate’. This treats risks purely as threats. plan and allocate stages [6]. Examples of a focus on risks as threats Risk categories largely threat orientated using terms like ‘poor’ allocation/use. acceptance: Avoidance: ‘‘is changing the project plan to eliminate the risk or condition or to protect the project objectives from its impact.1. The scope of uncertainty The scope for uncertainty in any project is considerable.may take the form of.2.2/3. clarifying what can be done. but ambiguity rather than variability becomes the more dominant underlying issue towards the bottom of the list.1. Chapman / International Journal of Project Management 21 (2003) 97–105 99 about what is desirable or undesirable. ‘interruption’.2.2). and where it is not. each of them involving dependencies on later areas in this list. ‘lack of’. and most project management activities are concerned with managing uncertainty from the earliest ‘Conception’ stage to the final ‘Support’ stage of the project life cycle (PLC) [6].action that will reduce the problem’’. mitigation.4). . 11. Here these aspects of uncertainty contribute to uncertainty in five areas: the variability associated with estimates of project parameters. transference. or ‘quality’. 11. moderate or high’’. Although the project team can never eliminate all risk events. since a ranking of opportunities and threats would require a more complex approach.5. but generally items become more fundamentally important to project performance as we go down the list. paragraph numbers shown in parentheses.S. the basis of estimates of project parameters.. C. Extracted from [4].3. design. Transference: ‘‘does not eliminate it (risk)’’. and ensuring that it gets done. force majeure (11. Taking early action to reduce the probability of a risk’s occurring or its impact on the project is more effective than trying to repair the consequences after it has occurred. Potential for variability is the dominant issue at the top of the list. Table 1 Illustrations of a threat perspective objectives and priorities. Description of types of risk response (11.2. 11. and relationships between project parties.  possible occurrence of particular events or conditions which could have some (uncertain) effect on the activity. Use of probability impact matrices (11.5. 4.2). and quality related to particular activities. lack of detail. working and framing assumptions being used to consider the issues. . Variability associated with estimates An obvious area of uncertainty is the size of project parameters such as time.3. .’’. For example. Uncertainty in the plain English sense of ‘lack of certainty’ is in part about ‘variability’ in relation to performance measures like cost.2. In a project context these aspects of uncertainty can be present throughout the PLC.2.3. 4. All these areas of uncertainty are important.2. Uncertainty about variability associated with estimates involves the other four areas. and ignorance about how much effort it is worth expending to clarify the situation. Terminology Risk described in terms of severity (11.3). design and logistics.2) PIMs require an ordinal or cardinal scale ‘‘to determine whether a risk is considered low.5. some specific risks may be avoided. The causes of this uncertainty might include one or more of the following:  lack of a clear specification of what is required. Ward. ‘‘. most table entries expressed in threat terms.3.5). lack of data. deciding what is to be done.3. Figure 11.2.2.3/4. The term ‘impact’ is linked with severity of effect (11.3. lack of structure to consider issues. cost.2). Mitigation: ‘‘seeks to reduce the probability and/or consequences of an adverse risk event to an acceptable threshold. but they are particularly evident in the conceive. we may not know how much time and effort will be required to complete a particular activity. Rating impacts for a risk (Figure 11. Key concerns are understanding where and why uncertainty is important in a given project context. lack or experience of this particular activity. Individual illustrative examples all threat based (11. known and unknown sources of bias. This is a significant change in emphasis compared with most PRM processes. ‘conflicts’. High impact risks considered undesirable: non linear scales ‘‘reflecting the organisation’s desire to avoid high-impact risks’’ (11. duration..  limited analysis of the processes involved in the activity. ‘‘nearly always involves payment of a risk premium to the party taking on the risk’’.  complexity in terms of the number of influencing factors and inter-dependencies between these factors.3.  novelty.

1. For example. estimates may also be conditional on the assumed non-occurrence of ‘‘force majeure’’ events.2. This uncertainty is further compounded if related activities are not well defined. future customers. (p. Bias may be conscious or unconscious. how and when they were produced. Estimates ought to be clear about the extent to which they have been adjusted to allow for factors in the above categories. However. why. (p. but articulating them at least makes these estimates available for scrutiny and comparison with other estimates.2. or complex. A large proportion of those using probabilistic analysis in projects often fail to get to grips with the conditional nature of probabilities and associated measures used for decision making and control. The implications of uncertainty related to the nature of objectives and relative priorities need to be managed as much as uncertainty about what is achievable. further uncertainty typically exists about what levels of adjustment to estimates are appropriate for different project parties. Failure to make or identify such adjust- ments. and clues if not data. much of this uncertainty is removed in pre-execution stages of the PLC by attempting to specify what is to be done. This gives rise to the characterisation of such events and possible changes as either ‘known unknowns’ where they are identifiable at least in qualitative terms. 4.3. or there has been limited opportunity to develop a high quality estimate (as in many competitive tendering situations. This is an implicit admission that management is uncertain about the status of estimates. 11. what form they are in. then the uncertainty in subsequent estimates is amplified and may become considerable. relatively novel. 4. For example. the contractor’s view of what adjustment to cost estimates is appropriate to cover force majeure will be rather different from the client’s view. Chapman / International Journal of Project Management 21 (2003) 97–105 Only the last of these items really relates to specific events or conditions as referred to in the earlier definitions of a ‘risk’. C. . Deliberate pessimistic bias to ‘‘protect’’ estimates may be systemically induced by previous management practice of arbitrarily cutting back all estimates provided from members of the project team. The nature of design and logistics assumptions and associated uncertainty may drive some of the uncertainty about the basis of estimates. for example). In practice.4. Adjustment for bias in estimates is especially difficult.100 S. Uncertainty about the basis of estimates An important area of uncertainty relates to the basis for estimates produced by project parties [4]. A particularly important source of uncertainty is the nature of assumptions underpinning estimates. how. introduces additional uncertainty about assumed prevailing conditions.4). Uncertainty about the basis of estimates may depend on who produced them.2. are less obviously described as threats or opportunities. Ward. and ‘unknown unknowns’ when they are unspecified events or possible changes. 4. when. even when they are identified. a significant amount of this uncertainty may remain unresolved through much of the PLC. pessimistic or optimistic.5). The effects of such events and possible changes may be difficult to quantify. from what resources and experience base. It is perhaps indicative of a perceived failure of conventional risk management and project management to address objectives and trade-offs that the concept of ‘Value Management’ has been introduced to encompass this [7]. The need to note assumptions about resources choices and methods of working is well understood if not always fully operationalised (see for example: [4]. The other sources of uncertainty arise from a lack of understanding of what is involved and as such. Morris and Hough [8] argue for the importance of setting clear objectives and performance criteria which reflect the requirements of various parties. Uncertainty about design and logistics In the conception stage of the PLC the nature of the project deliverable and the process for producing it are fundamental uncertainties. The basis for such subjective judgments may be unclear. However. at what cost. Attempting project management or risk management when this clarity is lacking is like attempting to build a tower on wet sand. and possible changes in project context and scope. and the rationale for them.3. may be available or not. or the parties may have different perceptions of with whom the consequences of a given force majeure will finally rest. Uncertainty about objectives and priorities An aim of improving project performance presupposes clarity about project objectives and the relative priorities between objectives and acceptable trade-offs. The set of force majeures that could impact on each party may be different. In principle. for example). it is often necessary to rely on subjective estimates for probabilities in the absence of sufficient relevant statistical data for determining probabilities ‘objectively’. 11. including stakeholders who are not always recognised as players (regulatory authorities. and by whom. and the extent of any bias in estimates. If this cycle of padding and cutting back of estimates goes unchecked. The problem of uncertainty about the conditions underpinning estimates is even greater in respect of estimates of the probability of an event occurring. to what extent should one party worry about allowing for force majeure events? If a client company out-sources a particular task to a contractor.

4. Best practice regards risk as encompassing both threat and opportunity. a useful clarification consistent with everyday usage if not identical to dictionary definitions. or unwelcome consequences. and may. For example. a process involving ‘uncertainty identification’ (rather than ‘risk identification’). and in common parlance risk is more usually synonymous with threat. focussing on potential threats. To address uncertainty in both variability and ambiguity terms. For example.11]. The nature of assumptions about contractual relationships and associated uncertainty may drive uncertainty about objectives and priorities with further knockon effects. business units. and mechanisms for coordination and control. and uncertainty about fundamental relationships between project parties. PRM processes which adopt a focus on threats will not address many of . More fundamentally. prompting possible responses such as ‘re-schedule activities’. The involvement of multiple parties in a project introduces uncertainty arising from ambiguity in respect of [9]:       specification of responsibilities. This ambiguity ought to be systematically addressed in any project. Towards uncertainty management Efficient and effective project management requires appropriate management of all the sources of uncertainty outlined in the previous section. An obvious first step towards uncertainty management is to remove this ambiguity by using the term ‘uncertainty’ in the everyday sense of ‘lack of certainty’ as a starting point. A comprehensive PRM process concerned with threats and opportunities will do better. but guidance on PRM is frequently couched in threat management terms. and lost opportunities may be the biggest casualty. Other steps involve modifications to PRM processes to address the various sources of uncertainty outlined in the previous section. An obvious first step is to consider the usefulness of terminology involving the word ‘risk’ and various threat orientated terms. not just those involving formal contracts between different organisations. For example. Contractor organisations are often more aware of this source of ambiguity than their clients. 4. perceptions of roles and responsibilities. these sources of uncertainty. 5.S. or may not. the capability of parties.5. This is the definition adopted in Chapman and Ward [6]. C. and any inter-dependencies between different objectives need to be appreciated. Chapman / International Journal of Project Management 21 (2003) 97–105 101 The different project objectives held by interested parties. In particular. ‘obtain additional resource’. The nature of objectives and priorities assumptions and associated uncertainty may drive some of the uncertainty about the basis of estimates and the amount of variability estimated. would draw attention in a natural way to items 3. everything else comes apart. and organisations involved in a project. 7) because it clarifies the core pursuit of ‘risk efficiency’. Uncertainty about fundamental relationships between project parties A pervasive source of uncertainty is the multiplicity of people. This does not facilitate consideration of aspects of variability which are driven by underlying ambiguity. interpretations of risk apportionment implied by standard contract clauses may differ between contracting parties [10. Replacing ‘risk’ with ‘uncertainty’ as a starting point could significantly broaden thought processes in ‘risk identification’ which becomes ‘uncertainty identification’. cost and performance are not clear. although the full scope of the risks and opportunities that this ambiguity generates for each party in any contract (via claims. Included here can be ambiguity about roles and responsibilities for bearing and managing project related uncertainty. A less obvious second step is to associate ‘downside risk’ with the implications of significant ‘threats’. involve formal contracts. and 5 in Table 2: uncertainty about design and logistics. if the relative priorities of time. we need to modify and augment existing PRM processes and adopt a more explicit focus on uncertainty management. uncertainty about project objectives and priorities. For example.1. However. contractual conditions and their effects. Risk becomes ‘the implications of significant uncertainty about the level of project performance achievable’. (p. might highlight ‘unavailability of a key resource’. Ward. Revise terminology Present use of the term ‘risk’ is ambiguous. Additionally an ‘uncertainty identification’ process would induce identification of a wider set of responses for managing a particular source of uncertainty. The relationships between the various parties may be complex. Consideration of significant threats and opportunities then becomes part of uncertainty management. for example) may not always be fully appreciated until rather late in the day. widely followed guidance is defined in terms of ‘events’ or ‘circumstances’. 5. a ‘risk identification’ process. if a ‘fair weather partnership’ cracks when the going gets tough. but will still tend to be focussed on uncertain events or circumstances. and ‘upside risk’ with the implications of significant ‘opportunities’ to welcome consequences. communication across interfaces. the associated uncertainty for all three will be larger than it would be if clear priorities were determined.

Variability associated with estimates 2. ‘Risk management’ is one of the products. In particular. in Table 1. Uncertainty about objectives and priorities 5. essential characteristics of the resource. neutral description of factors. not at all in terms of closely related and widely adopted terminology [6]. C. Table 3 gives further examples drawing on terms included in Table 1. For example. and the possibility of excess as well as shortage of the resource. prompting questions about all factors influencing availability. Uncertainty about design and logistics 4. and the detail of the uncertainty management strategy. Chapman and Ward [6]. ‘Uncertainty management’ is the process which is the focus of our attention. Critically important. and a reemphasised focus on ‘risk efficiency’. Uncertainty about the basis of estimates 3. A further important benefit of this terminology is a shift in emphasis without a need to throw away the useful terms ‘risk’ and ‘risk management’. Ward. further iterations can then address whether or not associated risk needs to be managed. An important further benefit of this terminology is the way it encourages an iterative approach with an initial focus on the question ‘does it look like uncertainty matters. the depth of understanding warranted. Decisions about the transfer of risk would become decisions about the transfer of significant uncertainty.102 S. and a range of other widely appreciated spin-offs which are valuable in their own right. how to make good use of excess resource has to become an issue. After simple substitution of ‘uncertainty’ for ‘risk’ in all terminology. the risk response of ‘mitigation’ is described as reduction of probability and/or consequences of an ‘adverse risk’ [4]. more focus on value analysis issues. Thus instead of the risk ‘unavailability of a key resource’. Uncertainty about fundamental relationships between project parties Table 3 Uncertainty Management terminology Risk management a downside risk an upside risk a risk (upside or downside) a (possible) source of risk a problem an impact a weakness a poor allocation inadequate avoid risk mitigate lack of major risk absence of Uncertainty management a threat (giving rise to downside risk) an opportunity (giving rise to upside risk) a source of uncertainty a source of uncertainty an issue a consequence/effect an issue an inappropriate/unclear allocation Inappropriate resolve uncertainty modify shortage or surplus of significant uncertainty availability of . more focus on project objectives. Not only would this terminology induce a more considered view of the wisdom of risk (threat) transfer. Table 2 Types of uncertainty 1. or can uncertainty be safely ignored. Other products included are enhanced communication. in some areas if not in total?’ Where it may matter or if it may matter. Chapman / International Journal of Project Management 21 (2003) 97–105 an exercise seeking to identify sources of uncertainty encourages a more open ended. it would also stimulate con- sideration of wider implications of transfer strategies. which facilitates a less constrained consideration of response options. in these (revised) terms we need to move our focus from the product to the process. an additional step would be to modify wording in PRM guidelines wherever this associates risk (uncertainty) with threat. refer to the generic response of ‘mitigation’ as impact modification (rather than impact reduction). Taking an uncertainty perspective. an exercise identifying sources of uncertainty would express this as ‘uncertainty about availability of a key resource’. Their meaning changes only very slightly in terms of APM and PMI terminology. the upside and the downside. and the generic response of ‘prevention’ as changing the probability of occurrence (rather than reducing it). The perceived risk may change as the understanding of uncertainty develops.

to trigger studies of operations which provide an input into a range of projects.2). The project manager may not be the appropriate party to be responsible for them. to manage expectations that any subsequent refinement of estimates should indicate less uncertainty rather than discover more. 11. and facilitate selective. or even by corporate management.4). leaving the client to manage this variation in cost. A threat perspective encourages a focus on these initial motivating . 11. discourage decision making based on inappropriately limited data. in terms of the quality. refinement of response strategies and key decision choices. ‘unknown unknowns’. 11. ‘Known unknowns’. and from what resources and experience base. C. The approach is deliberately conservative (pessimistic) about variability to counteract natural bias towards ranges that are too narrow.2. For example. ‘unknown unknowns’.3. cost effective development of estimates where appropriate. 5. Chapman / International Journal of Project Management 21 (2003) 97–105 103 5. but also for associated probabilities. and bias are inherently difficult to size. Existing PRM processes generally recognise the desirability of recording key assumptions used to generate estimates [4]. and to avoid dismissing uncertainty which may be significant. difficulty in estimating time or effort required to complete a particular activity may arise from a lack of knowledge of what is involved rather than from the uncertain consequences of potential threats or opportunities. why. This problem is more readily identified with uncertainty management than it is with PRM focussed on the consequences of particular events on a given project’s objectives. is an important aspect of uncertainty management. as illustrated by this example. However. 5. this raises the issue of how such cost variations might be allocated within the client’s organisation. the current widespread use of probability impact matrices to size risks generates unnecessary uncertainty by over-simplifying estimates of impact and associated probability. This would help counteract bias in estimates. uncertainty about the time and cost needed to complete design or fabrication in a project may not be readily attributable to particular sources of risk. Attempting to address this difficulty in conventional PRM terms is not appropriate. The first pass is an attempt to size variability reflecting all relevant underlying ambiguity associated with the size of uncertainty about both the impact and probability of risk events occurring. with a view to managing it. This may require going beyond addressing uncertainty associated with a specific project.2.4. What is needed is action to improve knowledge of organisational capabilities and reduce variability in the performance of particular project related tasks. or by higher. and bias in estimates referred to earlier may not be controllable or readily sized by the project manager. and what is the responsibility of programme and corporate management. In respect of particular sources of risk. Clarify uncertainty about the basis of estimates The basis for all estimates needs to be understood. how and when they were produced. reliability and integrity of underlying data [4]. a contractor may avoid the need to allow for the variation in cost arising from the presence of these conditions by appropriate contractual agreement. As noted earlier. As noted earlier.2.2. Ward.3. and to combine these in a way that does not obscure or underestimate potential variability. a ‘minimalist’ approach [12] is to identify explicit ranges not only for estimated impacts. as well as design and logistics Careful attention to formal PRM is usually motivated by the large scale use of new and untried technology while executing major projects. (p. An uncertainty management perspective would seek an understanding of why this variability arises. but the organisation at some level has to be. practice could improve in terms of the extent to which assumed conditions are recognised and treated in estimates. For example. Should this variation in cost be incurred by the project manager’s budget?.S. Delineating what uncertainties the project manager is responsible for. but they cannot be ignored for corporate management purposes. clearly indicating what matters and what does not. Thus a best estimate of the cost of a particular activity is of limited value without some indication of the range or probability distribution of possible costs. In the minimalist approach expected values and associated ranges for all quantified sources of uncertainty are presented graphically in a way that displays the contribution of each to the total. Expose and investigate variability Single point estimates of a particular parameter are of limited value for uncertainty management (and PRM) purposes without some indication of the potential variability in the size of the parameter. but to variability in efficiency and effectiveness of working practices. what form they are in. A first pass display provides a basis for managing subsequent passes of the process in terms of data acquisition to confirm important probability and impact assessments. Recording answers to these questions would provide useful guidance on the quality of estimates. with uncertainty about the size of probabilities often dominating uncertainty about the size of impacts. However. An alternative. where there are likely to be significant threats to achieving objectives.3. if certain conditions do in the event apply.3.4. programme level or corporate level contingency funds? A key point is that the ‘known unknowns’. (p. uncertainty about the basis of estimates may depend on who produced them. Address uncertainty about fundamental relationships.

In this scenario ‘control evaluation’. Consider for example. further Design and Plan effort may be necessary.5. Such issues need to be addressed very early in the project and throughout the PLC. 6. If incentives lead to more efficient working practises involving less multi-tasking. Failure to develop operational measures of performance in a way that allows tradeoffs between performance criteria creates substantial uncertainty which has effects beyond individual projects. 5. the potential for misalignment of objectives between the design department and the project is substantial. Specifically. the different tradeoffs for different project stakeholders. C. . is fundamental to effective identification and management of both threats and opportunities. Comprehensive treatment of project uncertainty requires an approach which amounts to modifying and augmenting current PRM processes. and the implications of tradeoffs that change over time. If these objectives are unsatisfactory. staff morale and staff turnover may improve. cost and quality. it may not be practicable to ensure that all project objectives are well defined or crystallised prior to the Execute stage. and should be informed by a broad appreciation of the underlying ‘root’ uncertainties. it is suggested here that a threat and event-based perspective can result in a lack of attention to several important areas of project related uncertainty. undertaken each time a milestone is achieved. This could lead to opportunities associated with easier hiring. Important management questions are: how much is it worth to a project to be able to complete the design faster?. including: variability arising from lack of knowledge. However. a deepening experience base. Conclusions Risk management can make an important contribution to effective project management. 4. objectives and related performance criteria can be refined progressively through the Conceive. A simple but effective starting place involves use of the phrase Project Uncertainty Management instead of Project Risk Management. Address uncertainty about objectives and priorities Strategies for managing project uncertainty cannot be divorced from strategies for managing project objectives and associated trade-offs. For many projects. However. This becomes apparent in previous stages where decisions to continue with the project acknowledge the continued ambiguity about objectives. in some projects. Design. Use of the six Ws framework from the earliest stages of the PLC could usefully inform development of project design and logistics by clarifying key sources of uncertainty. there is some justification for the view that current PRM processes are threat orientated and that this can limit the contribution that PRM makes to improving project performance. the basis of estimates.104 S.14]. Plan and Allocate stages of the PLC [6]. tradeoffs in producing in-house design work for a project. Further process modifications would also assist this shift of emphasis. However. ‘virtuous circle’ benefits. ‘Value management’ and related approaches to the formulation of objectives should be regarded as one part of the uncertainty management process [1]. 5. 3. and the development of appropriate objectives and associated tradeoffs. Ward. 6. but rather are related to sources of ambiguity introduced by the existence of multiple parties and the project management infrastructure. If no appropriate incentives exist. 2. This would help to shift PRM processes from a threat focus towards a greater concern with understanding and managing all sources of project uncertainty. and qualitative improvements in designs on future projects with cumulative.  More emphasis on understanding ‘root’ uncertainties facilitated by frameworks such as the six Ws. what might the effect on the quality of design be? Uncertainty management could involve design of internal incentive contracts between the design department and project manager to encourage appropriate tradeoffs by the design department. the treatment of assumptions about operating conditions. Chapman and Ward [6] offer a six Ws framework for this purpose based on the following six questions: 1. Who are the parties ultimately involved? What do the parties want to achieve? What is it that each party is interested in? Whichway (how) is each party’s work to be done? What resources are required? When does it have to be done? Understanding the uncertainty associated with each of these basic questions. key performance issues are often unrelated to these motivating factors. and the implications of interactions between them. and might include for example:  More emphasis on recording information in suitable format about the basis for estimates in order to guide subsequent refinement of estimates and analysis. ought to include a ‘configuration review’ of objectives currently achievable with the project [13. Further a threat orientation is not the only concern. Chapman / International Journal of Project Management 21 (2003) 97–105 factors. for example information systems or software development projects. A key issue is ‘do all parties understand their responsibilities and the expectations of other parties in clearly defined terms which link objectives to planned activities?’ The six Ws are a core framework for considering the tradeoffs between time.

Ward S. editors.  More emphasis on quantitative approaches which do not obscure variability. [10] Hartman F. International Journal of Project Management 1993. Hickling A. US: McGraw-Hill. Male S. An ‘uncertainty management’ perspective facilitates such a focus and also draws attention to the need to understand and manage variability in organisational activities that have an input into a number of projects. UK: E & FN Spon. techniques and insights. Towards an integrated script for risk and value management. Project management 2001. Snelgrove P. taking a programme or corporate view. Snelgrove P. UK: The Association for Project Management. 1987. [4] Project Management Institute. with the potential to influence project design and base plans on a routine basis. [7] Kelly J. an uncertainty management approach should facilitate integration with project management earlier in the PLC than a threat orientated PRM process. 2nd ed. 1997. Journal of Construction Engineering and Management September 1996:291–6. C. 1993. 1997. Goals and methods matrix: coping with projects with ill-defined goals and/or methods of achieving them. Ashrafi R. Planning under pressure: the strategic choice approach. A guide to the project management body of knowledge. UK: John Wiley. Value management in design and construction: the economic management of projects. 1997. [2] Friend JK. Newland K. Project risk analysis and management (PRAM) guide. Risk Decision and Policy 1999. Ward S. The need to explore and understand uncertainty (and avoid a largely pessimistic threat orientated perspective) is greatest in the earliest stages of the PLC. 2000. Effective wording to improve risk allocation in lump sum contracts. UK: John Wiley. [6] Chapman C.S. [13] Turner JR. International Journal of Project Management 2000. . The handbook of project based management: improving processes for achieving your strategic objectives. [9] Ward S. [14] Turner JR. Hough GH.4(1):57–73. [11] Hartman F. Against risk. [12] Chapman CB. as part of managing the project infrastructure. 1992. Ward. Again an uncertainty management perspective highlights the need to address some aspects of project related uncertainty outside of particular project contexts. Journal of Construction Engineering and Management December 1997:379–87. Risk allocation in lump sum contracts—concept of latent dispute. References [1] Green SD. Project Management Journal September 1999:37–43. Hillson D.11:93– 102. UK: Butterworth-Heineman. Comprehensive project uncertainty management should operate as an important extension of conventional project development. ‘Unknown unknowns’ and bias need to be allowed for at some level in the organisation.18:369–83. Finally. and it is not efficient for these issues to be considered only at project level. USA: Project Management Institute. Requirements for an effective project risk management process. [5] Simon P. An uncertainty management perspective more naturally focuses attention on this stage of the project than threat orientated PRM. The anatomy of major projects. reducing reliance on probability impact matrices and adopting approaches such as the ‘minimalist’ approach [12]. Project risk management: processes. Chapman / International Journal of Project Management 21 (2003) 97–105 105  Developing methods for articulating and comparing performance objectives and perceived trade-offs between them. Estimation and evaluation of uncertainty: a minimalist. Cochrane RA. A similar argument applies to identification and treatment of the conditions (‘known unknowns’) assumed to prevail when developing estimates. 2000 edition. A weakness in current PRM processes is that they are not readily focussed on sources of operational variability in the performance of organisational activities. occasionally influencing very basic issues like the nature of project stakeholders and their objectives. [3] Dowie J. first pass approach. [8] Morris PWG. during conception when uncertainty is at its greatest.7(1):52–8.

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